Filing identity and reporting period
The supplied filing is PharmAthene, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2016, not an Altimmune, Inc. filing. PharmAthene describes itself as a biodefense company developing next-generation anthrax vaccines. Financial comparisons below are to the three months ended March 31, 2015; balance-sheet comparisons are to December 31, 2015.
Financial performance and position
| Metric | Q1 2016 | Q1 2015 or comparison |
|---|---|---|
| Contract revenue | $1.01 million | $7.07 million |
| Operating expenses | $2.26 million | $5.91 million |
| Operating income (loss) | $(1.25) million | $1.16 million |
| Net income (loss) | $(1.23) million; $(0.02) per share | $1.46 million; $0.02 per share |
| Operating cash flow | $(1.36) million | $(2.71) million |
| Cash and cash equivalents | $14.24 million | $15.57 million at Dec. 31, 2015 |
| Current assets / current liabilities | $16.14 million / $2.64 million | $17.23 million / $2.18 million at Dec. 31, 2015 |
| Total assets / total liabilities | $18.73 million / $3.11 million | $19.86 million / $3.21 million at Dec. 31, 2015 |
| Accumulated deficit | $224.95 million | $223.72 million at Dec. 31, 2015 |
Investing cash use was negligible ($150); financing provided $22,352, primarily from stock-option exercises. Cash declined by $1.33 million during the quarter. The balance sheet reports no borrowing balance; current liabilities include $468,304 of warrant-related derivative liabilities. No gross or net margin figures are provided in the filing.
Material changes versus prior period
- Revenue fell about 86% year over year. Q1 2015 included approximately $5.8 million of one-time revenue following a BARDA audit and SparVax contract wind-up activity; Q1 2016 revenue was primarily from the NIAID vaccine-development contract.
- Research and development expense declined to $1.03 million from $1.61 million, and general and administrative expense fell to $1.19 million from $2.20 million, largely reflecting the 2015 workforce and cost-reduction plan.
- The company moved from net income to a net loss. Other income was lower, mainly because the fair-value gain on warrant derivatives was $39,898 versus $338,245 in Q1 2015.
- Cash decreased from year-end, while current liabilities increased; total liabilities decreased slightly. Q1 operating cash use was lower than in the prior-year quarter.
Outlook, risks, and unusual items
- SIGA judgment: The Delaware judgment was estimated at approximately $208 million as of March 31, 2016, plus interest. PharmAthene had not recognized potential proceeds in its financial statements. Under SIGA’s bankruptcy plan, SIGA may pay the unpaid balance in cash, transfer all its common stock, or agree to another court-approved resolution. PharmAthene received $5 million in April and approximately $0.9 million in May 2016; these subsequent-period payments are creditable against the claim. SIGA’s ability to satisfy the judgment is uncertain.
- Liquidity outlook: Management believed March 31 cash, together with the post-quarter SIGA payments, would fund operations for at least twelve months. That assessment depends on operating costs, NIAID funding and collection of the judgment. The filing cautions that continued losses without adequate funding could require the company to cease operations.
- Potential shareholder distribution: If SIGA pays the claim in cash in full, PharmAthene said it currently expects to distribute at least 90% of after-tax net cash proceeds, subject to legal, tax and other considerations. It intends afterward to seek an M&A transaction for remaining assets and vaccine programs. If SIGA transfers its stock, PharmAthene expects to develop a plan to operate SIGA separately.
- NIAID contract: The incrementally funded contract has a potential total value of approximately $28.1 million if milestones are met and all options are exercised. Two options had been exercised, adding approximately $4.9 million and extending performance through April 30, 2017. Further funding is not assured.
- Contingencies: A BARDA audit of 2014 SparVax costs remained pending with the government contracting officer; the company said it did not expect an adverse effect but could not assure the outcome. Government contract costs remain subject to audit and possible disallowance. Government funding changes or contract suspension or termination could adversely affect results.
- Management cited $156 million of tax net operating losses at December 31, 2015, subject to tax-law limitations, and estimated a possible $9 million to $22 million NOL increase related to winding down UK operations. A rights plan is intended to help preserve NOL availability.
- Contractual obligations totaled $2.08 million, including leases and research and development agreements. The filing states there were no off-balance-sheet arrangements. Disclosure controls were assessed as effective at a reasonable-assurance level.
Key facts for investors to verify
- Confirm that this PharmAthene filing—not an Altimmune filing—is the intended document.
- Track SIGA’s choice and performance under the bankruptcy plan, timing and amount of further payments, and the ultimate realizable value of the judgment.
- Verify NIAID option exercises, milestone progress, contract receipts and the duration of available operating cash.
- Review the outcome of the BARDA audit of 2014 costs and any resulting revenue, recovery or disallowance.
- Assess any announced SIGA-related shareholder distribution, including its amount, timing, tax treatment and effect on remaining operations.